Maximum Likelihood Estimation of Dynamic Panel Data Models with Interactive Effects: Quasi-Differencing Over Time or Across Individuals?

Cheng Hsiao and Qiankun Zhou

A chapter in Essays in Honor of Joon Y. Park: Econometric Methodology in Empirical Applications, 2023, vol. 45B, pp 353-384 from Emerald Group Publishing Limited

Abstract: The authors consider the quasi maximum likelihood (MLE) estimation of dynamic panel models with interactive effects based on theAhn et al. (2001,2013) quasi-differencing methods to remove the interactive effects. The authors show that the quasi-difference MLE (QDMLE) over time is inconsistent whenN→∞whether T is fixed or goes to infinity. On the other hand, the QDMLE is consistent and asymptotically unbiased if the difference is taken over individuals when T is large whether N is fixed or large. Monte Carlo studies are conducted to compare the performance of the QDMLE using different quasi-difference methods.

Keywords: Dynamic panel models; interactive effects; maximum likelihood estimation; quasi-difference; high dimensional data; unbiasedness; C01; C13; C23 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aecozz:s0731-90532023000045b015

DOI: 10.1108/S0731-90532023000045B015

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